June 2nd, 2017
Fed Beige Book Results
On Thursday, the Federal Reserve Beige Book report was released, compiling economic updates for the 12 Federal Reserve Districts in the country. The overwhelming majority of the economic news was positive, but the report also highlighted certain trends of particular interest to the building products industry.
The economic information reported can vary widely by district, leading us to place particular weight on any key trends that seem to be uniformly cited across districts. The most important of these was the tightness of the labor markets.
In order of severity of labor issues from least to greatest, regions described the labor situation in the following ways: 1) companies are actively hiring, 2) the labor market is tight or very tight, 3) wages are steadily increasing (particularly among skilled workers) and 4) there is an active labor shortage at various levels. Of note is the fact that, despite the tight labor markets and our economy at full employment, total employment in most districts increased. This could be taken as a sign that previously discouraged workers who had left the potential labor pool have decided to take up employment again.
While tight labor markets and a shortage of labor are not greeted with excitement by an HR manager tasked with filling new positions, they are generally very good signs for the economy. So many other decisions are driven by the outlook on employment that a healthy labor market is vital to decisions to remodel a home, buy a second home and similar choices.
Overall, the districts reported that their economic activity is expanding modestly or moderately. Consumer spending, in particular, was reported to be healthy across districts. Manufacturing activity is increasing and most districts reported seeing inflation in prices and input costs. Like a tight labor market, increasing prices have their downside but are also indicative of an overall healthy economy.
With regard to residential building, most districts reported stable to growing activity. The New York district, with its heavy focus on financial services activity, reported that residential loan activity is increasing even more strongly than commercial lending, adding further support to housing activity.
Of interest on the commercial side were reports that companies are looking to vacant suburban office space for opportunities to refurbish and repurpose those locations. The death blow delivered to the suburban office market by the millennials’ preference to live downtown appears to be greatly exaggerated. Like the majority of the other updates in the Beige Book report, this is good news for door and window manufacturers.
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